Call it welfare for the rich. Why? Wealthy businesses and individuals are the folks who get the tax credits for putting up the cash to pay the tuition. Furthermore, the amount of money for tuition made available for tuition by private scholarship organizations often does not actually cover the full cost of attending a private school. Poor families can’t make up the difference. Guess who can.

Fortunately, the reality is almost exactly the opposite. Donors are not benefiting financially at the expense of the poor or anyone. And while it is true that tax-credit scholarships do not always cover the full cost of tuition at private schools, thanks to low-cost options and needs-based tuition breaks, low-income families are the primary beneficiaries of STC programs.

STC Donors Do Not Benefit Financially

It is odd to claim that “wealthy businesses” are financially benefiting by receiving a tax credit for their donations. Even a 100% tax credit means that they are simply no worse off than before. A corporation with a $10,000 tax liability that made a $10,000 donation to a scholarship organization would then owe no state taxes but they would still have $10,000 less than they did before. Whether the $10,000 went to the government or a non-profit is irrelevant to their bottom line.

Moreover, Strauss fails to mention that most state STC programs do not grant 100% credits. In fact, only four of the fourteen STC programs do. The other credits range from 50% to 90%. In these states, corporations would be better off financially if they merely paid their taxes.

STC Programs Benefit Low-Income Students

It is telling that Strauss provides only one example to support her claim that rich people benefit from the scholarships instead of the poor: “[Pennsylvania families] eligible to receive money to pay private tuition can earn more than $72,000…”

The key words in that sentence are “can earn.” The relevant question is how much do the families of scholarship recipients actually earn. The nonpartisan Pennsylvania Legislative Budget and Finance Committee reported in 2010 that the average scholarship recipient’s family earned only $29,000 annually, less than half what the program allowed at the time.

The available evidence shows that Pennsylvania is not unique. Scholarship recipients in Florida must earn less than 185% of the federal poverty line, which is the income threshold for the federal government’s free and reduced lunch program. Nevertheless, the average annual household income of Floridian scholarship recipients is only $24,250, just 12.3% above the federal poverty line. And though Arizona’s corporate STC program has no means-testing requirement, a 2011 study found that more than two-thirds of scholarship recipients earned less than 185% of the federal poverty line.

It should be noted that in addition to Strauss’ central arguments, her broadside contained numerous significant inaccuracies. Contrary to Strauss’ assertions, scholarship tax credit programs are not the same as vouchers. They differ greatly in terms of their funding mechanisms and administration. Moreover, the U.S. Supreme Court has ruled that STC programs use private money not public money. Every state supreme court to address the matter has agreed. Finally, well-designed STC programs such as those in Arizona, Florida, and Pennsylvania actually save states money by decreasing state expenditures more than they decrease state tax revenue.

Under the status quo, wealthy families already have school choice while low-income families do not. Wealthy families can afford to live in districts with high-performing government schools or to send their children to private schools. By contrast, low-income families generally only have one choice: the local assigned government school.

The good news is that scholarship tax credit programs work as intended. As the Washington Post editorial board understands, STC programs expand educational opportunities for low-income families, empowering them to meet the individual needs of their children.

- Jason Bedrick

Jason Bedrick is Visiting Policy Analyst at the Cato Institute’s Center for Educational Freedom. He earned his Master’s in Public Policy, with a focus in education policy, from the John F. Kennedy School of Government at Harvard University. His thesis, “Choosing to Learn,” assessed the scholarship tax credit programs operating in eight states including their impact of student performance, fiscal impact, program design, and popularity.

[...] to pay the full 80% of ADM ($6,987) to the family, just the amount used on the student. In essence, just like most scholarship tax credit programs, the state would be saving a large amount of money because no [...]

Unfortunately the author doesn’t see the bigger picture that would rob ALL, both rich and poor, of any choice! Vouchers and Tuition Tax Credits (TTC) would first push out all private schools who chose not to take them, just as Pell Grants did to private colleges. They either had to accept them or fold. They couldn’t compete financially.

When that happens the only difference between schools would be the ownership of the building! ALL schools would then be basically government schools. That is the way it is in every country that has done this including the Netherlands and Sweden. Unions and very liberal philosophies have been forced on all schools.

Don’t kid yourself. Vouchers, TTC, STC, or whatever name change you want will destroy ALL choice for both rich and poor. At least now there is choice for those willing to make the sacrifice for it.

David, there are currently similar programs in 14 states, some in place for over a decade. Have any experienced the horrors you’ve described? Not quite. Moreover, scholarship tax credit programs come with significantly fewer regulations than vouchers. That is to a great extent because scholarship tax credit programs utilize private funds, not government funds.

I went to the Forster paper at one of your links, and its filled with unsupported causal conclusions, primarily claiming that “vouchers” are causing higher student achievement, and then drawing the unsubstantiated claim that expanding vouchers will spread that same magic to even more kids.

Despite all sorts of claims about “gold standard” research, Forster doesn’t provide enough details about the studies he cites to allow for any firm conclusions, but the causal claims he attributes to those studies would call into question the analytic ability of the researchers involved. You can do a “gold standard” study proving that fad diets work, if your only criteria for “gold standard” is whether random assignment was used. Trustworthy research is more complex than that, and people should sell fool’s gold as the real thing.

Aside from other studies finding no benefits for vouchers (oddly absent from the Forster paper) the most likely explanation for studies finding a slight advantage for charters is:

1) They didn’t control for all the relevant background variables, and these varied is systemic ways between charter/scholarship schools and publics.

2) The charter/scholarship operator advocate made the charter program sound much better to families than the default public schools, and attracted more motivated and able students and families from the “low-income” population. The charters served only these kids, and pushed out the slower ones from even that group. The publics served the lottery losers plus many less able/motivated students. Thus, the voucher program is merely a mechanism for skimming the cream and serving a more homogeneous population, and may not be “causing” any better student learning for the lottery winners–it’s just choosing a whole cohort of more able/motivated students and families.

3) For public policy purposes (where the point is to serve all kids, not just a few), comparing scores of kids from charters/scholarships with those of comparable publics is simply the wrong level of analysis. Politicians may not know better, and voucher/charter folks might be able to fool them by pretending that this is the relevant comparison, but it isn’t.

As for the $$ issues, in many sectors of the economy–health care, politics, education–the rich and powerful are using “choice” in ways that make society more unequal and that work to their benefit. That’s the big long-term game being played here, and is why the middle class is treading water while the super-rich are walking on air. Our “choice” among health care providers simply means we’ve chosen to pay much more for health care than do single-payer nations with better health outcomes than we do–and the only benefit of that is for shareholders and CEOs who rake in millions.

The private sector does some things better and government does other things better, and educating the masses while holding true to traditional American ideals is one area the government does better.

[...] at Education Next, the Cato Institute’s Jason Bedrick effectively shot down her arguments (Yes, school choice does help poor kids) and further rebuffed criticisms from Colorado’s own Kevin Welner. (I’ll stick with the [...]

[...] credit programs expanding.” Jason Bedrick of the Cato Institute wrote a dissenting March 1st statement on the Hoover Institution’s Education Next Blog in support of these tax credit programs, and in [...]